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IRS Updates Reserve Rates

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The Internal Revenue Service has published a new batch of interest rate assumptions that insurers can use in reserve computations.

The IRS has posted the new assumptions in Revenue Ruling 2010-07.

Insurance companies can use the new rates for tax years beginning after Dec. 31, 2008, to compute reserves for:

- Life insurance and supplementary total and permanent disability benefits.

- Individual annuities and pure endowments.

- Group annuities and pure endowments.

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Internal Revenue Code Section 807(d)(2)(B) requires that the interest rate used to compute the reserves be the applicable federal interest rate, if that is higher than the prevailing state assumed interest rate, or the prevailing state rate, if the state rate is higher, IRS officials say in the revenue ruling.

The prevailing state assumed interest rates for products issued in years after 1982 remain unchanged. The rate for a life policy guarantee for 10 or fewer years remains 4.5%, for example.

Many other rates in the table have increased from 0.25 percentage points to 0.5 percentage points.

The new tables are here.

The old tables here are.